Senate report links USDT to Iran’s shadow-banking lifeline

On September 28, 2026, Sen. Richard Blumenthal released a minority-staff report from the Senate Permanent Subcommittee on Investigations titled Tethered to Terrorism: Crypto & Iran’s Shadow Banking Network and referred the findings to Treasury Secretary Scott Bessent and Attorney General Todd Blanche. The referral asks federal agencies to examine Tether’s anti-money-laundering and sanctions compliance, including possible violations of the Bank Secrecy Act and the International Emergency Economic Powers Act.

The report says investigators reviewed blockchain activity tied to 846 wallets that U.S. and allied authorities sanctioned or targeted for seizure between June 2021 and August 2026. According to the report, 84% of those wallets transacted exclusively or nearly exclusively in USDT. The investigators describe three core findings: USDT functioning as a cross-border payment rail for illicit Iranian flows, links between Iranian entities and regional proxy networks, and issuer freeze practices before 2024 along with uneven blocking since that period.

The document provides case-level details. One network associated with oil smuggling is reported to have moved more than $603 million in USDT from 2021 through 2025. In one instance the report records about $34.6 million in transfers that continued after a designation. Based on the compiled wallet data, investigators estimated a minimum of $2 billion in Iran-linked crypto volume moved in 2025. The analysis relied on government sanctions lists, public blockchain traces and forensic expansion of addresses tied to Iran-linked actors.

Tether responded the same day in a company blog post, reporting it froze roughly $550 million in USDT across wallets U.S. authorities identified as connected to the Central Bank of Iran and other sanctioned networks during 2026. The company broke that figure into an April freeze of more than $344 million across two addresses that OFAC later listed as Central Bank of Iran digital-currency identifiers, and a July freeze of more than $130 million across four TRON addresses after Treasury expanded the CBI designations. CEO Paolo Ardoino wrote that public blockchains provide visibility for authorities and that Tether acts when it receives credible law-enforcement information. The post also referenced cooperation with more than 340 agencies in 67 countries and cumulative platform freezes.

The report is a minority-staff product and not a court finding or an OFAC designation of Tether. It notes that wallet attribution on public blockchains is pseudonymous and depends on linking public identifiers to government sanctions lists and investigative expansion. Tether contests aspects of the report’s timing and interpretation of freeze events. Any formal enforcement action or new OFAC digital-currency identifiers would be determined by Treasury or the Justice Department.

The release follows a May 2026 FinCEN alert that identified cryptocurrencies as a component of Iran’s shadow-banking network and a Treasury initiative that included digital assets among sectors at risk of expanded Iran sanctions. The PSI referral asks regulators to review Tether’s policies and actions and to determine whether further enforcement steps are warranted.